Expert Opinion Each week we ask a different Independent Financial Adviser to give us their solutions to common investing scenarios or issues facing those who take an interest in their money. Expert opinions, for free, every Wednesday! To contact an independent financial adviser in your local area call IFA Promotion on 0800 085 3250 or visit www.unbiased.co.uk

I have a buy to let mortgage for two properties and am a little bit worried about rising interest rates - how do I make sure that I don't get caught out?

I have invested quite heavily in property. How can I reduce my capital gains tax liability?

I want to start investing properly but don't want my investments to fund anything I don't approve of - how can I make sure this doesn't happen?

I am getting married soon and want to make sure my husband and I will both be looked after should anything happen to either of us - what is the best protection to take out? Is there anything else we should think about?

My husband and I have recently retired and want to use the equity in our house to fund a round the world trip. We don't want to move house to free up funds as we are very attached to our property, should we use an equity release scheme?

There seem to be lots of different kinds of financial advice - what are the main differences and how do I know which one to choose?

My elderly mother might need to go into a care home if her health deteriorates much more, the fees are very expensive so I want to know if there is any help we can seek?

My parents want to leave us their house as an inheritance, it is worth £400,000. How can we minimise the inheritance tax we would have to pay by planning ahead?

I am buying a property on my own. I have a well paid professional job which is very secure and want to get the largest mortgage I can. Where should I start looking?

We have just had a baby and want to start planning now to fund her education. What are the best options for us?

I am 30 years old and haven’t starting investing in any kind of pension yet. I have recently had a pay rise and want to start paying a decent amount in every month. What is the best kind of pension for me and how much should I look to save each month?

My wife has recently stopped working to look after our children full time. With the loss of one income, is there anything we can do to improve our financial situation?

I have recently come in to a medium sized amount of money, I want to invest this but need to be able to access it relatively easily. What should I do?

My husband and I have recently retired and want to use the equity in our house to fund a round the world trip. We don't want to move house to free up funds as we are very attached to our property, should we use an equity release scheme?

You are like many people in the UK who have wealth in the form of equity in their properties. This can be liquidated by using one of a variety of equity release schemes.

On the face of it, whilst it seems a logical solution to release funds from your property to fund the proposed round the world trip we would always recommend that you first consider using any other assets you may have.

Assuming that you do not have any other assets, you appear to be in a similar position to a lot of retired people in that you seem to be asset rich but cash poor.

I will also assume that your income will maintain your lifestyle in retirement but not fund any specific projects.

Before giving a definitive answer I would want to have answers to some specific questions, such as

•  Do you intend moving in the future?
•  Do you want to retain ownership?
•  How old are you?
•  How much is your house worth?
•  Do you have any borrowings against your house at the moment?
•  Do you have any children/grandchildren and have you discussed the option through with them?
•  How much is required to fund such a trip?
•  What is your income position?

Generically, if you are looking to raise equity from your property, a maximum percentage of the valuation may be released on a ‘Lifetime Mortgage' according to the age of the youngest applicant. Although all lenders' criteria are slightly different, a general rule of thumb, for someone aged 60 is 20 per cent and for someone aged 65 is 25 per cent of the property's worth.

This money would be advanced to you on one of a variety of schemes.

One scheme I would strongly advise against is the home reversion scheme as you are very attached to your property and – with this scheme – you would sign away a percentage of your property to the lender. As you would be looking for a lump sum payment you would be better suited to a cash plan.

Whether you elect to do an open ended interest-only mortgage or an interest roll-up scheme will depend on your income – if you can't afford to make additional month repayments an Interest Only mortgage would not be a suitable option.

An alternative form would be a shared appreciation mortgage where instead of interest the lender is entitled to a specified percentage of the appreciation in the value of the property between inception of the loan and the death of the borrower or sale of the property. When such an event happens capital is repaid along with the share of the appreciation. This isn't a suitable option should you wish to retain ownership of the property.

A typical interest roll-up scheme would be taken out with a fixed rate or variable rate of interest. No payments are made by yourself and interest is rolled up and added to your outstanding balance. It is only repaid on sale of property or the death of the second applicant. Unlike a normal mortgage there is no set term allocated to a Lifetime Mortgage.

In times of rising house prices the increase in the value of the property normally exceeds the additional interest added to the mortgage balance, but, conversely in periods of decreasing house prices you may see the remaining equity in the property dwindle away. However, lenders who are registered with the Safe Homes Income Plan (SHIP) logo guarantee a no negative equity situation throughout the period of the loan. I would urge you to only use a provider that has this accreditation. Based, on the information provided, this would appear to be the most suitable option available to you should you wish to release equity from your property. However, you should take legal and independent financial advice before proceeding.

One note of caution, with these types of arrangements there are higher charges than an ordinary mortgage. These costs include a valuation fee, administration fee and solicitor's charges.

Kevin Coleman, Certified Financial Planner, Park Row Corporate & Private Clients, Tel 01743 343232 or 07802 396617

There seem to be lots of different kinds of financial advice - what are the main differences and how do I know which one to choose?

There are broadly speaking three types of organisation that may make financial transactions on your behalf as follows:

1. Tied agents work for one company and are typically from banks or life insurers, recommending only their products. These products may be good or bad in relation to the general market and so you have limited choice.

A common misconception is that by dealing with product provider directly you save money; but this is often not the case and their charges can be higher than other parts of the market.

2. Multi-tied agents are similar to the first category, but provide a wider range of products from a limited number of suppliers; many private banks now fall into this category. In this instance you would have a wider range of options but from a defined list of suppliers.

3. Independent Financial Advisers (IFAs) are independent of suppliers and advise on solutions from the whole market. Thus you benefit from the widest choice possible.

An IFA should be able to provide you with advice that ensures you have the widest range of options available to suit your specific circumstances.

Execution Only

Some organisations do not advise on what is suitable – you tell them what you want and they arrange it. Many Discount Brokers and websites that allow you to purchase financial products act on an execution only basis.

With execution only the onus is on you to ensure that you have made the right decision. These companies inevitably carry lower costs as they do not provide advice.

Paying for Advice

An IFA should offer the option of paying for advice with a fee – if the adviser does not offer this option then he is either breaking the rules or not an IFA.

Many IFAs also offer you the ability to pay for their advice via commission from the product provider. For some products, such as pensions, this can work out more tax efficient and therefore cheaper.

Commissions are taken from charges levied throughout the life of a product; therefore for some people it can make budgeting for financial advice easier.

Tied and multi-tied agents tend to operate solely on commissions.

Qualifications

Qualifications are no guarantee of an individual's expertise, and some advisers with a lot of experience have little more than the minimum. However, additional qualifications show commitment to structured, ongoing learning and professionalism.

All financial advisers should have the entry level Financial Planning Certificate (FPC), or its successor CertPFS. This ensures the adviser has a basic level of industry knowledge.

The next tier of qualifications is the Advanced Financial Planning Certificate (AFPC); only a relatively small number of advisers have attained this qualification, which enables them to hone their knowledge in specific areas. Advisers with the AFPC can use a number of different designations after their name, including: DipPFS, MFSA or AFPC itself.

Summary

For impartial and unbiased advice choose an IFA; and if you are looking for more complex advice it is wise to seek one who is AFPC qualified.

Alex Pegley afpc, Director, calculis limited, www.calculis.com, 01264 332299

My elderly mother might need to go into a care home if her health deteriorates much more, the fees are very expensive so I want to know if there is any help we can seek?

Depending on your mothers circumstances there are many potential options available. There are national rules that local authorities have to follow.

The social services department is the place to start. They have responsibility for assessing the needs of those requiring care and also in providing financial support for those who are in need of care. You should first contact the local authority in the area where your mother lives.

The reality is that most people who require care will be expected to pay towards the cost from their capital and/or income. One of the crucial aspects is to establish whether the NHS are responsible for providing for the cost of care. The NHS have a term known as continuing NHS health care. Under this provision there are circumstances where the NHS may be responsible for providing for the full cost of your mother's care.

Even if your mother is not eligible for fully funded care she may be eligible for a contribution if she will require nursing care whilst in a care home. This contribution is only available to meet the costs of a registered nurse whose assistance you may need. Any other care you receive will not be covered by this.

Assuming that the local authority have assessed that your mother does need care, the next step is for them to asses the contribution, if any, that your mother must make to the cost of care. To do this they carry out a means-test. If your mother has available funds or assets in her own name or as a share of funds or assets held with others totalling over 20,500 then she must meet the full cost of the care (assuming she does not qualify under the NHS criteria as explained). If your mother has assets totalling over 12,500 but less than 20,500 she will be expected to make some contribution to the cost of her care.

Ultimately if your mother has to pay for her care the main concern may be the fact that this will, as you are no doubt aware, quickly eat into any assets that she has. One way to put a ceiling on this cost is through an immediate care plan. How this works is that, following considering your mother's needs and costs of care, an insurance company will offer to pay indefinitely for her care for a one off payment now. The actual cost varies depending on age, life expectancy, the nature of care needed and the cost of the care. You can also protect the cost of purchasing the plan should against, for example, your mother dying in the early years.

Ultimately the cost of care can be high but there are ways and means of reducing this cost or limiting it.

My parents want to leave us their house as an inheritance, it is worth £400,000. How can we minimise the inheritance tax we would have to pay by planning ahead?

Firstly, it is important to understand the regulations on inheritance tax. It is payable on an individual's death where the value of their estate exceeds the nil rate band. The nil rate band for the current tax year 2005/2006 is £275,000. Therefore, no inheritance tax is levied on the first £275,000 of an individuals estate but tax at 40% is payable as a flat rate on the value of the estate above the nil rate band.

There are a number of ways to reduce inheritance depending upon whether your parents wish to gift the house to you whilst they are still alive or whether they wish to leave their house to you through their Wills on their deaths.

Taking the former, the general principle is that an individual can gift assets during their lifetime and, subject to surviving for a period of 7 years following the date of the gift, no inheritance would be then be payable on the value of the gift on death. However, gifting a house is more difficult particularly due to the recent introduction of new legislation called the ‘Pre-Owned Assets' rule. It is not possible for your parents to gift you their house to save inheritance tax and continue to live in this unless they pay you rent for living in the property. This should be a market rate of rent as opposed to a notional ‘peppercorn' rent. If your parents did not wish to or could not afford to pay a rent to you then they have two options. Firstly, they could elect for their house to fall outside of their estates to save inheritance tax but they would be subject to an annual income tax charge on the notional market amount of the rent. Secondly, they could elect for the house to still form part of their estates in which case no income tax charge would be levied. Of course, this would rather defeat the purpose of gifting the house to you as it would still be liable to inheritance tax on their deaths.

f your parents did not wish to gift the house to you during their lifetimes they could leave the house to you through their Wills. It is likely that the house will be owned by them on a ‘joint tenancy' basis. This means that on the first of your parents to die, the house would automatically pass to the survivor. On the second death, the house could then be left to you through their Will. The problem with this approach is that there would be inheritance tax payable on the second death as the value of the house is greater than the nil rate band. However, through changing the ownership of the house to a ‘tenants in common' basis and the proper structuring of their Wills with a suitable ‘nil rate band discretionary trust' wording, it would be possible to avoid inheritance tax based on the current value of the property and the nil rate band. This is on the assumption that your parents do not have other substantial assets. This works by using the nil rate band on the first of your parents death to enable 50% of the property value to pass into a Discretionary Trust thus reducing the estate of the surviving parent.

This is a complex area and expert advice should be taken prior to taking any of the above steps.

Contact Details: Peter Cooper CFP, FLIA (dip) mgt, FSFA, Cooper Johnston Associates Ltd Faraday House, Hookstone Oval, Harrogate , HG2 8QE

Ideally the best place to start looking for a new mortgage would be through an Independent Mortgage Adviser. This will allow access to the whole market which means that the Adviser will be able to research ALL the available lenders and tailor this to your individual requirements.

For certain professions, (e.g. solicitors, doctors, accountants etc.) several lenders offer higher income multiples and require lower deposits, and this could be the best way of obtaining the maximum mortgage available at a competitive rate. Also, depending upon your exact circumstances, it may be possible to arrange for a total loan in excess of 100% of the purchase price, where the lender will secure 95% against the property and then offer up to a further 30% as an unsecured loan at attractive rates. 

Any lender will base the amount of money that they will lend upon the personal circumstances and credit history of the borrower. Some key factors to consider when applying for a new mortgage are as follows: -

• Type of profession
• Length of service
• Salary & benefits
• Deposit available
• Credit history
• Affordability
• Your age
• Amount and term of mortgage
• Type of property

Contact Details: Wayne Unsworth (IFA), Hallmark-ifa, Club Chambers, Museum Street, York, YO1 7DT www.hallmark-ifa.com Tel: 0845 1662343 Fax: 01904 632333 E-Mail: wayne.unsworth@hallmark-ifa.com

We have just had a baby and want to start planning now to fund her education. What are the best options for us?

Funding for education is in reality no different than planning for retirement or most other events.  Of prime importance is the length of time available.  Unfortunately in terms of education, unless you start planning around 5 years before the baby is actually born, time can be a real problem.  If you intend to start using the money when they are around 6 or 7 then this sort of period is really just too short to be sure that equities will work for you.  On the other hand the real cost is going to start at 11 when you do have a reasonable time period.  In essence you will be looking at a combination of cash and investment and unit trust savings plans.  These types of savings plans are especially flexible allowing you to stop/start contributions at any time and vary them.  A general fund is a good starting point such as Artemis Global unit trust or British Empire and Securities investment trust.  The child trust fund is not especially useful unless you are looking to fund education at university level.  It is possible to put extra contributions up to £1,200.  The money is not available for the child until 18 and is the child's and not the parents'.  Therefore you can't necessarily guarantee it being spent on education!

In terms of how much you should save I suggest as much as possible.  Average fees are around about £7,000 a year and go considerably higher the better the school so you need to think in terms of hundreds of pounds a month.  For the vast majority of people the combination of savings and money out of taxed income (ie a salary) will be the usual combination to help pay school fees.  If you are unsure where to start the very best option is to seek out a fee based adviser who will be able to sit down and work out your cash flow projections.

Mark Dampier, Hargreaves Lansdown, 0117 980 9929, www.hargreaveslansdown.co.uk

If your employer has a pension scheme your first port of call is to check that out. If your employer will contribute to the scheme as well as you that is extra money to help your pension fund.

If your employer does not offer a scheme they may offer access to a Stakeholder pension facility. A Stakeholder is just a personal pension but where the manager can charge no more than 1% of the fund per annum. This is an attractive low cost option but since you can find many Stakeholder and Personal Pensions with the same low charges you may still want to shop around for options such as fund choice. Stakeholder plans

A single charged pension with a good solid insurer that offers a wide choice of funds is going to be a good place to start building up a pension fund. Once you have built up a reasonable fund you could consider taking a more active approach with your pension investment. A Self-invested personal pension (SIPP) separates the investment from the plan administration. You pay the provider for the plan set up and administration but you can choose your own investments. Currently these can include shares, Unit Trusts, funds and commercial property after 6 th April 2006 the choice will widen to include residential property, Art, Antiques and collectibles.

How much to save is a matter of balancing your budget now with your future requirements. A Financial Planner can provide you with an accurate targeting exercise using specialist software. Roughly speaking assuming you will include State pensions as part of your retirement income and aim for 2/3rds of your salary before retirement around 12% of salary if you intend retiring at 65. This could nearly double if you wanted to retire at 60 to make up for this loss of investment growth, longer payment period and 5 years without state pensions.

My wife has recently stopped working to look after our children full time. With the loss of one income, is there anything we can do to improve our financial situation?

You won't be able to just replace her income but there are a number of things that you should consider in order to help improve your financial situation.

Firstly, fully review your spending habits to see if you can cut out or at least cut down any unnecessary expenses. Once you have done this draw up a budget and stick to it!

You should review all your cash investments in order to make sure that all your accounts are competitive. As your wife is now likely to be a non-taxpayer put any cash, that is not invested in ISAs, in her name, she can then fill in an R85 Inland Revenue form and have the interest paid into the account gross.

Next you should check that you are receiving child benefit and indeed any other benefits that you might be entitled to. For guidance you can check the department of work and pensions website at www.dwp.gov.uk

You should also review your debt management. In particular you need to review your mortgage and check that you have one of the better rates to suit your needs, as you may be able to make some savings here. If you are tied in to your current deal then consider it for the future. Likewise if you have expensive credit/store cards or personal loans you may be able to transfer to a 0% credit card – become a rate tart! But be aware that more and more credit card providers are now introducing a transfer fee so try to avoid these if you can.

Finally you could look at any investments you may have and if you need to boost your income you could switch them into income providing funds such as corporate bond, equity income or distribution funds.

If you really find you cannot manage on the one income perhaps your wife could consider looking for a flexible part time job that she can do working from home.

Anna Bowes, Chase De Vere, Tel: 01225 469 371, Web: www.chasedevere.co.uk

I have recently come in to a medium sized amount of money, I want to invest this but need to be able to access it relatively easily. What should I do?

The very first question to ask is “How long am I planning to invest the money for?” If you believe you will need access to the money within five years, the sensible thing to do is to play safe and keep your money in cash. Try and find the best instant access savings account you can. Consider using your Cash-ISA allowance to at least shield some of the cash from tax. If you have a trustworthy partner who pays less (or no) tax than you then one option is to open the account in his / her name, to reduce the tax on any savings interest you get. This is because a higher-rate taxpayer pays tax on bank interest at 40%, whereas a basic rate taxpayer pays half that (20%). A non-taxpayer can enjoy tax-free savings.

If you are planning to invest for longer than five years you may wish to consider collective funds (known as unit-trusts or OEICs). These offer you access to world markets in shares, bonds or both and are run by full-time by professional fund managers. Over the long term these investments are expected to beat the safe but dull returns you can get from a savings account. The trade-off is that collective funds are not guaranteed – your investment can and probably will fall in value at some stage. This is why you need to be comfortable investing for at least five years as stocks and shares can be volatile, especially in the short term. Over longer-time spans the risk reduces, as you have more time to ride out market falls and enjoy market recoveries. In other words, the risk to your initial investment lessens the longer you are prepared to invest.

Although they are designed for the long-term, collective funds can normally be accessed at any time without penalty. So, should your circumstances change, you could access your money quickly should you need to.

Nick Lincoln, Wilson Dean Financial Services Ltd, Tel: 020 8387 5900

ashbourne@ashleylaw.co.uk

01283 730749

Contact Details: Daniel Clayden Dip (PFS), Clayden Associates, www.claydenassociates.co.uk

Tel: (01364) 643004 Fax: (01364) 644297 Email: info@claydenassociates.co.uk

‘Clayden Associates' is a trading name of Clayden Associates Limited which is authorised and regulated by the Financial Services Authority. Answers given are for general guidance only and specific advice should be taken before acting on any of the suggestions made. Not all above products/services are regulated by the FSA.

Email: - wayne.unsworth@hallmark-ifa.com

www.hallmark-ifa.com